Jan 04, 2023

New Economic World Order

The EU can play a key role shaping the current changes of globalization. It should keep its eye on the transatlantic relationship.

A rainbow is seen over the container ship 'Maersk Genoa' as it sails off the northern coast of Tunisia in the central Mediterranean December 1, 2018.
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There is little doubt that Russian President Vladimir Putin’s invasion of Ukraine, launched just over 10 months ago on February 24, 2022, is not only reconfigurating world politics. It is also partly causing and partly accelerating fundamental shifts in the global economy.

Russia is becoming a pariah in economic terms, too. Having tried, and failed, to weaponize energy supplies and blackmail Europe into dropping its support for Ukraine by suspending gas deliveries, the Kremlin has effectively decoupled itself from its most lucrative market. Discounted exports to India and China may offset some of the losses, but this is a short-term strategy at best, given that the age of fossil fuels is nigh. And economic sanctions against Russia by Ukraine’s international supporters will continue to weaken Russia’s economy the longer they are in place. However, as Vladislav Inozemtsev writes in this issue, in the big scheme of things, Russia’s economic self-destruction may not matter much economically, but nonetheless change the world’s geoeconomics order.

The European Union should play a key role in shaping the changes, Gabriel Felbermayr and Guntram Wolff argue. “Germany and the EU must consider foreign economic policy in a more strategic and integral manner,” the economists point out. “Then it will be possible to shape the upcoming transformations of globalization in the interest of Europe.” Sabine Weyand, the EU’s director-general for trade, thinks Europe is well-positioned to do so. “The triad of values—openness, sustainability, and assertiveness—will put us in a position to stand our ground in the new phase of globalization,” she tells IPQ in an interview.

In the face of the danger that China will continue to pose, in cahoots with a weakened Russia or not, its attempts to undermine and change the rules-based international system, a key component of the new economic world order will be an intensified transatlantic economic relationship. However, the outcry over unfair subsidies written into US President Joe Biden’s pathbreaking climate and infrastructure bill, the Inflation Reduction Act, have overshadowed the vast economic possibilities that exist on both sides of the Atlantic.

As Chancellor Olaf Scholz told the German parliament in December 2022: “We must not allow ourselves to be divided in the transatlantic relationship. On the contrary: Instead of a big disagreement, we should work together even more closely and strengthen the joint and fair trade with the United States.”

This is quite a change from the “China, China, China” chorus Germany’s big companies still like to sing. One year into a chancellorship with a mixed foreign policy record, on this point Olaf Scholz is surely right.

Henning Hoff is Executive Editor of INTERNATIONALE POLITIK QUARTERLY.

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